Eastern Europe was hit especially hard by the credit crunch during the global financial crisis. This column presents new evidence suggesting that reliance on foreign funding was more important than foreign bank ownership per se in exacerbating the post-crisis credit contraction. These findings point to the need to put more emphasis on the discussion of bank business models, regulatory standards, and supervisory arrangements.

The Global Crisis sparked a vibrant debate about what factors were to blame. This column addresses one of the core questions of this debate: are global imbalances or excessive credit growth key suspects? Presenting new research, it’s clear that the painful adjustment in the real-estate markets of the US, Spain and other affected countries in the aftermath of the Crisis, and the key importance of momentum effects, call for further research on policies that can mitigate possible bubble-dynamics.